This is the second, edited and extended part of a talk given by DAVID YAFFE to the Free University of Turkey in Zurich on 13 May 2001. Further parts will appear in future issues of Fight Racism! Fight Imperialism!

From the First Imperialist World War to the Second World War

In Part One of this article1 I argued that for Marxists the labour aristocracy is not simply a sociological concept describing a privileged section of the working class in imperialist countries. It encompasses a historical process inextricably linked to the development of imperialism. It is a process in which labour and trade union organisations, representing the interests of the most privileged strata of the working class, are purged of anti-capitalist forces to prevent working class resistance against capitalism taking on a revolutionary character. Over time the privileged strata within the working class have changed as capital has restructured itself globally to sustain profitability and workers formerly among the most privileged sections of the working class have become impoverished or unemployed. New privileged workers have taken their place in the trade unions and labour organisations. The outcome of this historical process depends on the ability of imperialism to sustain these privileged strata of the working class and their political influence over the working class movement in periods of mass working class resistance during recurring crises of the capitalist system.

Britain is the oldest imperialist power and imperialism is an integral part of the fabric of British society. It runs like a disease through the body politic. It has deeply corrupted the organisations of the working class. Its rotten impact has spread to all progressive organisations including those of the ‘socialist’ left. This has not happened without a fight, often courageous and effective, by working class fighters and revolutionaries working under difficult circumstances. The period from the turn of the century until the end of the Second World War in Britain is full of important lessons in class politics, as imperialist crisis, war, depression and fascism saw mass resistance to ruling class policies from growing sections of the working class. The organisations of the labour aristocracy, the trade unions and the Labour Party, increasingly drawn into government and state institutions over this period, were decisive in determining the outcome of this conflict. They were not, however, without opposition, as in this period, working class resistance to capitalism was given political leadership by the British Communist Party and other small revolutionary groups.

The growing challenge to British imperialism

In Part One I argued that Britain’s relative industrial decline in the last decades of the nineteenth century was not synonymous with its decline as a major world imperialist power. In fact, it took two world wars for Britain finally to be replaced by the US as the leading imperialist power. The British ruling class fought long and hard to prevent US global supremacy, but to defeat Germany, Britain needed first the financial and later the military resources of the US. The outcome by the end of the Second World War was a permanent shift in the balance of world power in favour of US imperialism. Britain, the world’s largest creditor nation before 1914, became the largest debtor nation in 1945. Despite these setbacks, after the war Britain restored its fortunes through the brutal exploitation of the British Empire, and remained a powerful imperialist nation, second only to the US.

In 1914, Britain was the only nation whose economic interests were global. The British state exploited a colonial population of some 431 million people, seven times that of its nearest rival France.2 Britain accounted for 40% of the world’s total exports of capital in the period 1870-1914. While Britain’s share of world industrial production fell from 30% in 1870 to less than 15% by 1914, its total accumulated foreign investment increased from around £700m in 1870 to nearly £4,000m in 1913, more than 170% of national income. From 1870 onwards, British investment abroad regularly exceeded that at home and in the pre-war boom of 1911-1913 at least twice as much was invested abroad as at home, at its height reaching nearly 10% of national income. Over the period it has been estimated that a net export of capital of £2.4bn yielded an enormous income to Britain of £4.1bn. Throughout the period the balance of payments deficit on visible trade was more than made up for by the rising surplus on invisible earnings. Total invisible earnings from the export of services and investment abroad rose from 9.3% of national income in 1870 to 13.6% in 1913, almost the level of gross trading profits of private companies in that year at 14.2% of national income. From 1891 to 1913, invisible earnings averaged 11.1% of GDP, exceeding the deficit on the balance of trade by 5% of GDP.3

World power relations had to change in 1914 to bring them in line with the challenge to Britain’s economic supremacy by the growing industrial power of Germany and the US. The war was the inevitable result of this challenge. War severely disrupted the international economy, allowed the US to emerge as a global player and seriously damaged Britain’s ability to act as world banker. British assets abroad were reduced by about one quarter, some £1,000m, during the war. Assets, especially in the US, had to be sold off to pay for war supplies and in 1917 the Bolsheviks had cancelled British debts in Russia. Britain had, in addition, incurred a further debt to the US of around £750m. Britain’s invisible earnings were seriously affected by the war, by the devaluation of the pound in 1919, by the world financial crash and the great depression of 1929-33 and the protectionism of the 1930s. Between 1930 and 1938 invisible earnings had fallen to less than half the pre-war level, to 5.1% of GDP. Exports of goods had not regained their pre-war levels in volume terms by 1939. In the period 1930-1938 Britain had a deficit on the balance of payments equivalent to nearly 1% of GDP.4

In 1913, the gold standard – the symbol of British imperialism’s financial power – was suspended. It was then abandoned in 1919 when a brief credit-led post-war boom culminated in a devaluation of the pound. The pressure to return to the gold standard at the old exchange rate, however, was ever present and seen by dominant sections of the ruling class as the condition for restoring Britain’s global financial leadership, and with it, its invisible earnings. It was restored in 1925, at the behest of the City, creating even greater problems for Britain’s export industries in a period of high unemployment. As a result it was the US that was the main beneficiary of the 1925-1929 boom that accompanied Britain’s return to gold. The world financial crisis of 1929 and the recession that followed, forced Britain off the gold standard in 1931 – a defeat for the City. With international trade severely restricted and the US retreating into economic isolationism, Britain’s imperialist ambitions now centred on the Empire and the Sterling Area, which emerged in the 1930s as the most important international economic bloc.5 ‘Free trade’ liberalism had to be well and truly buried until its modern revival in the form of neo-liberalism at the end of the 1970s.

The inter-war years saw another important characteristic of imperialism becoming far more pronounced in Britain. In 1914 capital in Britain was probably the least concentrated of the major industrial economies. By 1939 it was one of the most. War, economic stagnation and depression had accelerated the concentration of capital. The modern multinational corporation began to emerge. Imperial Chemical Industries was formed in 1926 and Unilever in 1927-1930, Vickers merged with Armstrong in 1928-1929 and Guest, Keen and Nettlefold (GKN) took on its modern form in the late 1920s. Mergers and take-overs were widespread, systematically encouraged by the government. The 130 railway companies of 1914 became four large non-competing monopolies after 1921. The 38 joint stock banks before the war were reduced to 12 in 1924 with the ‘Big Five’ completely dominant. In 1935 at least 170 products were produced substantially by one, two or three firms, and 135 industrial conglomerates, employing 5,000 or more workers, produced 45% of gross industrial output.6

There was also a change in the industrial geography of Britain in the inter-war years. The flourishing domestic industries in the South East and the Midlands contrasted dramatically with the declining traditional export industries of the North and West. With the home market protected after 1931, manufacturing had a greater weight in the economy than before 1914. However the new investment followed the same pattern as pre-1914 when the high incomes generated from services, predominantly in the southeast, increased the demand for locally produced manufactures. Between the wars 50% of all the new firms formed in industry, transport, and services were in the South East. Many of the new factories were in the then luxury goods sector: vehicle manufacture, electrical trades and electrical household goods. In 1924 the traditional industrial regions (North West, West Yorkshire, North East, South Wales, and Central Scotland) produced half the total industrial output. In 1935 they produced 37.6%, barely more than the new industrial regions which had grown rapidly since then: Greater London and the Midlands. Other features of this period were a massive expansion of retail distribution and the boom in private house-building especially in the South East. 70% of net investment in manufacturing was in house-building between 1920 and 1938.7

Britain was still the only really international power of consequence in the 1930s. It had been the main beneficiary of the division of the German colonies and Ottoman Empire after the 1914-1918 war, becoming the dominant power in the Middle East, with oil rich Iraq in its domain. Britain was still probably the world’s largest overseas investor in 1929 and had estimated total assets of $16.86bn, compared with $14.6bn for the US. Despite the advance of the US, Britain was the largest foreign investor in South America to 1939.8 Britain was far less affected by the world slump, given the cushion of the British Empire, than its economic rivals, including the US. Despite the 1930s recession, manufacturing production in Britain in 1938 was 38% greater than the previous peak in 1929 – a growth rate of 3.6% a year.9 It was the increasing threat of and eventual war with Germany that forced Britain into economic and military dependence on the US and finally ended its international economic supremacy. This did not happen without resistance by sections of the ruling class, who right until the last possible moment preferred ‘appeasement’ with Hitler’s Germany to playing a subsidiary role to US imperialism.

Imperialism and the working class

The British ruling class has always understood the connection between the ‘purely economic and the socio-political roots of modern imperialism’ (Lenin). The imperialist plunderer Cecil Rhodes expressed the connection with brutal clarity when he is reported to have said in 1895:

‘I was in the East End yesterday and attended a meeting of the unemployed. I listened to wild speeches, which were just a cry for “bread! bread!”...and I became more than ever convinced of the importance of imperialism...My cherished idea is a solution for the social problem, ie, in order to save the 40,000,000 inhabitants of the United Kingdom from a bloody civil war, we colonial statesmen must acquire new lands to settle the surplus population, to provide new markets for the goods produced in the factories and mines. The Empire, as I have always said, is a bread and butter question. If you want to avoid civil war, you must become imperialists.’10

This has been a recurring theme of ruling class governments, whether Tory, Liberal or Labour, since that time. Joseph Chamberlain used a similar argument to back up his position for the abandonment of ‘free trade’ and its replacement by imperial preference based on the Empire.11

‘Today no one contests any longer the enormous advantages of a unified Empire, keeping for ourselves the benefits of trade...Believe me the loss of our domination would weigh first of all on the working classes of this country. We should see chronic misery let loose. England would no longer be able to feed her enormous population.’

Winston Churchill, as Chancellor of the Exchequer, in 1929 argued that imperialism was the indispensable foundation for the maintenance of social services.

‘The income which we derive each year from commissions and services rendered to foreign countries is over £65m. In addition, we have a steady revenue from foreign investments of close on £300 million a year...that is the explanation of the source from which we are able to defray social services at a level incomparably higher than that of any European country or any country.’ (Budget speech, 15 April 1929)

Ernest Bevin, as Labour’s Foreign Secretary after the Second World War, saw the British Empire as indispensable to the life of Labour’s constituents.

‘I am not prepared to sacrifice the British Empire because I know that if the British Empire fell...it would mean the standard of living of our constituents would fall considerably’. (House of Commons, 23 February 1946)

The belief commonly held by all these ruling class politicians is that the brutal subjugation and exploitation of oppressed peoples is necessary in order that bourgeois ‘democracy’ and social peace can survive in imperialist Britain. They are actively concerned to prevent the social unrest that could turn the working class against capitalism in a period of deepening crisis and imperialist rivalry. This is the essence of social imperialism.12

The crisis of imperialism and the working class

Between 1850 and 1875 the privileged section of the working class in Britain was composed of distinct strata of skilled workers who enjoyed almost exclusive rights of trade union organisation and received their privileges (wage differentials) by union bargaining through the market. As Britain’s monopoly came under challenge the economic basis of this narrow craft unionism and political liberalism was undermined. The class struggle revived and unskilled workers, supported by socialists, were organised in a wave of new unionism in 1889-1890. These new unions were eventually absorbed, not without challenge, into the old union structure and failed to live up to their political promise.13 However as inter-imperialist rivalry further intensified, class conflict exploded and trade union membership grew massively, particularly during the strike wave of 1910-1914 and through the war years to 1920. Nearly a quarter of the working population belonged to trade unions in 1914, more than four million workers, compared to half a million in the mid-1870s. At its inter-war peak in 1920 there were 8.35m workers in trade unions.14This penetration of trade union organisation into far wider strata of the working class, with an even higher proportional increase among unskilled (male) workers, was much deeper than that of 1889-1890. It represented the most fundamental challenge to the bourgeois labour movement since the defeat of Chartism.

How was this movement to be controlled and made safe for capitalism? The mechanism of bribing a whole privileged section of the working class through the market was clearly now economically difficult, with the traditional craft industries in decline and the changes taking place in the working class. It would also be politically unreliable, given the intensity of class conflict and the involvement of much wider strata of the working class. The answer was for the state and/or employers to offer economic privileges and political status to the privileged layers of the working class who run and control the labour and trade union organisations and through them attempt to control the working class movement.15 This was done through a whole series of economic and political reforms underpinned by ‘state welfare’, which was gradually extended to wider layers of the working class as economic conditions improved. The creation of the Labour Party made this task immeasurably easier.

The Labour Representation Committee (1900) was set up by a trade union movement that excluded 90% of the working class, together with representatives from middle class ‘socialist’ organisations. It had become increasingly clear that the Liberals, and therefore the Liberal-Labour alliance, was no longer sufficient to defend the unions in a period when the social and economic conditions of the labour aristocracy were deteriorating. The LRC was built from an alliance of the 65 trade unions, representing around 670,000 members and political organisations such as the Social Democratic Federation, the Independent Labour Party and the middle class Fabians. The interests of the labour aristocracy totally dominated its proceedings. In 1906 it became the Labour Party. Throughout its history it has always rigorously promoted Britain’s imperialist interests and supported the narrow interests of the privileged working class and growing middle class.16 The formation of the Labour Party represented neither a victory for socialists, nor a move in the direction of socialism, but the effective containment of any socialist trend arising within the trade union movement.

State welfare began with the first significant measures of the pre-war Liberal government – a National Insurance Act (1911), Old Age Pensions Act (1908) and Labour Exchanges (1909). Limited though these measures were, the TUC Parliamentary Committee argued that national insurance should be limited to trade unionists ‘otherwise you will have men to support who never had been or never will be self-supporting. They are at present parasites on their more industrious fellows and will be first to avail themselves of the funds the Bill provides.’17 The organisations of the labour aristocracy were very resolute, like their present-day Labour Party counterparts, in preserving the distinction between ‘deserving and undeserving poor’. Their opposition quickly evaporated when the government offered trade unionists a role in the administration of such schemes on bodies such as Courts of Referees (administering the National Insurance Act), Local Employment Committees, Boards of Guardians, Boards of Assessors and later on Public Assistance Committees. Lenin called this process Lloyd-Georgism and said it was recognition that ‘it was impossible to gain the following of the masses without... promising all manner of reforms and blessings to the workers right and left – as long as they renounce the revolutionary struggle for the overthrow of the bourgeoisie.’18 In fact the ‘reforms and blessings’ were very limited. Old age pensions of 5 shillings were given to workers who reached the age of 70 and had an income of less than £21 a year. The average life span of the working class at the time was only 55 years.19 But that would be to miss the point. The incorporation of the organisations of the labour aristocracy into the imperialist state would create those ‘responsible’ forces within the working class movement that would identify with the government, and which would be in a position to hold back working class resistance, and stop it taking on a revolutionary character. This process was greatly reinforced during the war years.

The Labour Party and trade unions declared a political and industrial truce during the war and were quick to rally behind the Empire against the German threat. Most trade unions signed the Treasury Agreements of 1915. These made strikes illegal, forced dilution of labour (deskilling etc) without safeguards, bound the worker to the factory using so-called ‘leaving certificates’ and in the words of Ralph Fox ‘abolished for the period of the war all the gains of nearly a century of class struggle’. The TUC organised recruitment drives for the armed forces. The Fabian ‘socialists’ HG Wells and GB Shaw became propagandists for the government. The rewards were substantial. Trade unionists were appointed to state committees overseeing production and distribution and the Labour Party was offered cabinet positions in a coalition government. In return these organisations were expected to police the working class, keeping the inevitable resistance to ‘speed-up’, falling wages and dilution of labour to a minimum.20 Social imperialism, which now expressed the interests of the labour aristocracy, was reinforced as a trend in the coalition government of the war years.

The battle for the working class movement

Lenin argued that the ‘proportion of the working class who would follow the opportunists will be revealed only in struggle’. The years from 1914 to 1926 were to prove decisive for the working class movement in Britain. This contribution can only briefly point to some significant political and economic developments that determined the eventual outcome.

Before the war, from 1910-1914, strike activity had been four times the level of the previous decade. In 1912 nearly one and a half million workers were on strike and 41m days were lost. Women workers played a major role in the strike movement.21 Every one of the major strikes from 1911-1914 was begun as an unofficial, spontaneous movement of the workers, rapidly spreading throughout the industry concerned. The union leaders would then give the union’s official support. Their rapid acceptance of mediation by the Liberal government in every case ‘doomed the strike to semi-failure’.22 In 1914 the Triple Alliance of miners, railwaymen and transport workers was formed to co-ordinate strikes in these industries. This was a significant advance but it had obvious limitations. A strike could only take place when all three unions involved agreed, leaving a great deal of power in the hand of the opportunist trade union leaders. Syndicalist ideas (industrial unionism as the means to transform capitalism) were widespread at the time, a reflection of the contempt many workers had for ‘socialist’ organisations, the Labour Party and parliamentary democracy. The absence of a revolutionary party at the time was almost certainly crucial in limiting the political effectiveness of these struggles. The war then changed the whole political situation and the opportunities created in this period were temporarily lost.

The incorporation of labour organisations into the state was to prove decisive, and the politically expedient, short-lived post-war inflationary boom 1919-1920 gave the trade union leadership time to consolidate its authority. The general unions of the semi-skilled and unskilled workers were structured in this period to minimise the influence of poorer sections of the working class, with the predominant control of those unions handed to unelected officials. Ernest Bevin, General Secretary of the Transport and General Worker’s Union, became a dominant, influential right-wing force of the Labour movement over the next decades. Despite the enormous conflicts of the period and the massive impact of the Russian revolution, the working class movement was unable to overcome the inevitable betrayals and sabotage of the organisations of the labour aristocracy.

In 1919 the miners demanded a series of measures, including the nationalisation of the industry, and were prepared to call a national strike to enforce their demands. The government set up a Royal Commission to look at the issue. In 1921 the commission reported and the government refused to accept its report and the recommendation to nationalise the mines. The miners called upon the other unions in the Triple Alliance to take joint action in support of their demands. The miners were locked out of the mines on 1 April 1921, but the other unions took no action. On 8 April JH Thomas, the reactionary leader of the railwaymen, announced that the three unions would strike on 13 April, giving time for ‘negotiations’. The strike was never called and on Friday 16 April Thomas said that the strike had been called off. The miners continued their strike for a further 13 weeks until forced to give way through lack of funds. This was a turning point in the movement and the government was able to go on the offensive. The economic situation deteriorated sharply, industry stagnated and unemployment grew rapidly as hundreds of thousands of skilled workers lost their jobs. Unemployment between 1920 and 1939 was never below 10%, reaching a peak in 1933 of 25% of the insured labour force: around 3m workers. By 1924 trade union membership had fallen to 5.5m, falling under 5m over the next few years and did not recover until the end of the 1930s.

The Communist Party was formed in July 1920. It emerged from a fusion of small groups whose total membership was no more than 2,000 in 1920. It was very inexperienced and was unable to totally break away from the backward and reactionary traditions of the British labour movement. The backwardness of the British left, which formed the Communist Party, was revealed on the colonial issue at the Second Congress of the Communist International in 1920. British members of the Commission on the National and Colonial question resisted the suggestion that they should help to organise revolutionary movements in the British colonies. It took some time for the Communist Party to free itself of such attitudes but from 1925 it did engage in revolutionary work in Britain’s colonies. There were other problems as well. There was ignorance and underestimation of illegal work, a great deal of confusion in dealing with the opportunism of the Labour Party ‘lefts’, particularly with the Independent Labour Party.23 All these are issues which the revolutionary movement will be forced to tackle in the future.

Where significant fightbacks took place, the small Communist Party – 3,000 members in 1924, growing to 6,000 by 1926 – and other independent socialists, led them. The National Minority Movement (1924), set up by the Communist Party and other left-wing forces, fought for left-wing policies in the trade unions. The communist-led National Union of Unemployed Worker’s Committee Movement, organised from outside the official Labour movement, was the dominant force behind the militant grass roots struggle against unemployment in the 1920s and 1930s. As late as 1937, 25% of the membership of the Communist Party was unemployed, reflecting the Party’s consistent work among the unemployed in the inter-war period.24During this time the official labour movement showed total disdain and hostility towards the unemployed.25

The Communist Party threw itself into the General Strike of 1926. Class pressure forced the TUC to call a general strike in support of the miners. But it conducted itself in such a way that it meant certain defeat. The strike was called off after nine days, just as support was growing. The TUC had done nothing to prepare for the strike while the government engaged in nine months’ intensive preparation from mid-1925. In this period 12 members of the Communist Party Executive were arrested and convicted of charges that essentially made the party an illegal organisation. This shows the importance of preparing for illegal and underground work. During the strike one third of the 3,000 people prosecuted for offences were communists – nearly 17% of the party’s membership. The revolutionary forces of the working class were criminalised by the government during the conflict and isolated by the Labour Party/trade union alliance after it. The defeat of the 1926 General Strike proved decisive and, most of all meant defeat for those forces that could threaten the control that the organisations of the labour aristocracy had over the working class. In 1927-1928, during a brief industrial boom, communists were banned and proscribed within the Labour Party and the trade unions.

Because of its Empire, Britain survived the Great Depression of the 1930s far better than many of its competitors. Employed workers suffered a small fall in money wages during the depression but they rose again from 1934 to 1938. While there were wide variations between the wages of the skilled and unskilled, the most important divisions were between the employed and unemployed. Employed workers had a significant rise in the standard of living between the wars.

The 1930s were transitional years for the structure of the working class. The old industries on which Britain’s industrial wealth had been based – coal, iron, steel, shipbuilding and textiles – went into decline. The number of coal miners fell from 1.25m in 1920 to under 800,000 in 1939 and the numbers in the miner’s union fell proportionally. Iron, steel, shipbuilding and cotton were similarly affected. Unemployment at its peak hit 35% of coal miners, 43% of cotton operatives, 48% of steelworkers and 62% of shipbuilding workers.26 The old labour aristocracy was thrown into poverty. At the same time British capital was to be increasingly restructured around the rapidly growing unproductive service and commercial sectors associated with the imperialist orientation of British capital in the South, and the new luxury and consumer industries of the Midlands and the South that serviced it. 15% of the labour force was employed in the new science-based industries in 1935 compared to 5% in 1907. The working class was being remade in the interests of capital. New privileged layers of the working class – a new labour aristocracy and a growing professional and managerial middle class – gradually replaced those skilled craft workers prominent at the end of the nineteenth century.

The Labour Party and trade unions had survived intact the difficult years of the 1920s and 1930s. They could now consolidate their organisation and programmes to ensure that the labour organisations of the working class would be no threat to capitalism for a very long time. By the mid-1930s the Communist Party was losing its revolutionary drive and by the Second World War had ceased to be a revolutionary party. Opportunism had triumphed.

3. See Robert Clough Labour: a party fit for imperialism pp15-19 Larkin Publications London 1992, Cain and Hopkins British Imperialism: Innovation and Expansion 1688-1914 p231 and British Imperialism: Crisis and Deconstruction 1914-1990 p44 Longman 1993, James Hinton Labour and Socialism Wheatsheaf Books 1983 p25 and Eric Hobsbawn Industry and Empire Weidenfield and Nicolson 1968 p161.

4. Cain and Hopkins 1914-1990 op cit p40-41,44.

5. Cain and Hopkins op cit pp31-75. The countries in the Sterling Area were those of the formal British Empire, excluding Canada and British Honduras; Argentina; the European Sterling Area of Norway, Sweden, Denmark, Finland, Latvia, Lithuania and Estonia; and Portugal, Iraq, Egypt and Thailand (Siam). Cain and Hopkins op cit p80.

10. From Lenin ‘Imperialism, The Highest Stage of Capitalism’ in Collected Works Vol 22 Lawrence and Wishart 1964 p256.

11. This position split the Tories in 1903 and was rejected at that time by the Liberals and Labour who stood by ‘free trade’ imperialism. However it was in all essentials adopted in 1931 when Britain came off the gold standard.

12. The quotes from the politicians are taken from Palme Dutt op cit p22-33.

13. See Part 1 of ‘The labour aristocracy and imperialism’ op cit.

14. Eric Hopkins The rise and decline of the English working classes 1918-1990 Weidenfield and Nicolson 1991 p8.

15. Foster op cit p20-21. Foster at times seems to argue that what is needed is primarily a manipulation of organisation and leadership of the labour and trade union organisation. This in itself would be insufficient. In addition, the organisations of the labour movement, in both their membership and their policies, would have to give disproportionate weight to the more privileged sections of the working class. This is, of course, what has been the case.

16. See Clough op cit for formation of Labour Party pp25-35.

17. Cited in K Mann The making of an English ‘underclass’ Open University Press 1992 p53

25. Clough op cit pp134-147. For a discussion of the strengths and weaknesses of the Communist Party work in the Minority Movement and more generally throughout this period see R Clough ‘Communists and the Trade Union Movement’ Fight Racism! Fight Imperialism! 141 February/March 1998.